5 Simple Strategies to Help You Save Money During Tax Season
By Space Coast Daily // February 17, 2023
Taxes are tough to avoid, but there are some ways available that can help you save money when preparing and filing your taxes.
For instance, you can use the tools and services offered by TurboTax to file your taxes and claim some of their service codes and coupons to save some money. But you first need to know what is TurboTax service code and how best to take advantage of such offers.
In any case, this article shares 5 tips that will help you save funds during tax season.
Invest in Municipal Bonds
Purchasing a municipal bond entails providing money to a state or local governmental entity in exchange for specific interest payments over a set period. The interests on Municipal bonds are tax-free at the federal level and may be tax-free at the local and state levels, based on where you reside. Municipal bonds do appeal to many investors due to their tax-free interest payments.
Make use of a Health Savings Account (HSA)
Workers with high-deductible health insurance plans can use a health savings account (HSA) to lower their tax liability. Like with a 401(k) payroll deduction, HSA contributions (which may be matched by the employer) are excluded from the employee’s taxable income; direct contributions to an HSA are 100% tax-deductible from income.
Aim for Long-Term Capital Gains
Investment can be a valuable technique for increasing wealth. The favorable tax treatment for long-term capital gains is another advantage of investing in stocks, mutual funds, bonds, and real estate. If an investor holds a capital asset for more than a year, the capital gain is taxed at a preferential rate of 0%, 15%, or 20%, depending on the investor’s income level. In other words, the capital gain is taxed at regular income rates if the asset is held for less than a year before being sold.
Establish a Business
Aside from earning extra money, a side-business has numerous tax benefits. Several expenses can be subtracted from income spent during daily business, lowering the total tax requirement. Health insurance premiums which are accessible if certain conditions are met, are particularly essential tax deductions for self-employed individuals. In addition, by rigorously adhering to IRS requirements, a business owner may reduce a portion of their home expenses through the home office deduction.
Use Retirement Accounts and Employee Benefits to the Fullest
Contributions to 401(k) or 403(b) plans can lower taxable income by up to $22,500 in 2023. Individuals aged 50 and over can increase their standard employer retirement plan contribution by $7,500. Moreover, individuals without a workplace retirement plan can earn a tax credit by investing up to $6,500 in a standard individual retirement account in 2023.